GOLD NEWS

India mulling further efforts to curb gold imports

India could take more steps in the Union Budget on February 28 to curb gold imports.

MUMBAI (Mineweb) - 

The rumblings are getting louder by the day. The Indian government is considering more steps to curb gold imports and is looking to put a cap on the purchases of the precious metal to contain the country's swelling current account deficit.

The world's biggest gold importer has been trying to get its population to buy less of the metal and help bring down the country's import bill.

Late January, the government hiked the import duty on gold and platinum to 6% from 4% to curb imports of the precious metal. However, realising that an import duty hike was in the offing, bullion retailers purchased 23% more gold in January this year, ahead of the duty hike.

"The shipment was the highest in 18 months and clearly undermined the government's efforts to cap imports. A purchase of 100 tonne in one month is 40% more than the monthly average. This has got the government worried once again," said Baijal Pushpesh, bullion retailer.

Pushpesh and other retailers are of the opinion that when the government announces its budget for the year beginning April 1, 2013 on February 28, it could take further action to curb demand.

A Minerals and Metals Trading Corporation (MMTC) official told reporters on the sidelines of a metals conference in Mumbai that the government could either cap the number of banks that are allowed to bring the metal into the country or impose a fresh set of duties.

India's apex bank, the Reserve Bank of India, had earlier indicated it could limit gold imports by banks, which corner about 60% of supply.

The country's passion for gold, seen by many as a hedge against inflation, has got the government worried especially since around 20,000 tonnes is reportedly lying unused with Indian households.

MMTC is India's largest importer of gold and silver. The state owned trading company has been curbed on many occasions and asked to bring in less gold into the country. The official added that imports could be down by 30 tonnes this fiscal from the 160 tonnes the company imported last fiscal.

Retailers added that though the government has tried to impose curbs, with a four fold rise in customs duty, there was only a 12% decline through 2012, at 864.2 tonne, compared with 986.3 tonne in the previous year.

"Consumption cannot be stopped in India," said Minawala, of the All India Gems and Jewellery Trade Federation. "Irrespective of all the measures that the government brings on, imports could touch 850 and 950 tonne this calendar year," he added.